The calculations below outline how an intrinsic value for
Yum China Holdings
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.

The current share price of
Yum China Holdings
is above its future cash flow value.

Often investors are willing to pay a
premium
for a company that has a high dividend or the potential for future growth.

PRICE RELATIVE TO MARKET

We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for
Yum China Holdings's
earnings,
growth
and
assets
is considered below, and whether this is a fair price.

Price based on past earnings

Are
Yum China Holdings's earnings available for a low price, and how does
this compare to other companies in the same industry?

High Growth Checks

Yum China Holdings's earnings are expected to grow by 2.7% yearly, however this is not considered high growth (20% yearly).

Yum China Holdings's revenue is expected to grow by 5.9% yearly, however this is not considered high growth (20% yearly).

Past and Future Earnings per Share

The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.

Past performance checks

We assess
Yum China Holdings's performance over the past 5 years by checking for:

Has earnings increased in past 5 years? (1 check)

Has the earnings growth in the last year exceeded that of the
Hospitality
industry? (1 check)

Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)

Is the Return on Equity (ROE) higher than 20%? (1 check)

Is the Return on Assets (ROA) above industry average? (1 check)

Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)

The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
Yum China Holdings
has a total score of
6/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Health

A company's financial position is much like your own financial position,
it includes everything you own
(assets)
and owe
(liabilities).

The boxes below represent the relative size of what makes up
Yum China Holdings's finances.

The net worth of a company is the difference between its assets and liabilities.

Net Worth

Yum China Holdings is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.

Yum China Holdings's cash and other short term assets cover its long term commitments.

Balance sheet

This treemap shows a more detailed breakdown of
Yum China Holdings's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
checks below.

Assets

Liabilities and shares

The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.

High level of physical assets or inventory.

Debt is covered by short term assets, assets are 78.1x debt.

Historical Debt

Nearly all companies have debt. Debt in itself isn’t
bad,
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.

Management

Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.

CEO

JoeyWat

COMPENSATION

$7,567,483

AGE

47

TENURE AS CEO

1 years

CEO Bio

Ms. Joey Wat has been the Chief Executive Officer of Yum! China Holding, Inc since March 1, 2018 and has served as its President and Chief Operating Officer since February 7, 2017 until February 2018. Ms. Wat has been a Director of Yum! China Holding, Inc since July 2017. Ms. Wat served as Chief Executive Officer, KFC from October 2016 to February 2017, a position she held at Yum! Restaurants China from August 2015 to October 2016. Ms. Wat joined Yum! Restaurants China in September 2014 as President of KFC China and was promoted to Chief Executive Officer for KFC China in August 2015. Before joining YUM, Ms. Wat served in both management and strategy positions at AS Watson of Hutchison Group (“Watson”), an international health, beauty and lifestyle retailer, in the U.K. from 2004 to 2014. Her last position at Watson was Managing Director of Watson U.K., which operates Superdrug and Savers, two retail chains specializing in the sale of pharmacy and health and beauty products, from 2012 to 2014. She made the transition from Head of Strategy of Watson in Europe to Managing Director of Savers in 2007. Before joining Watson, Ms. Wat spent seven years in management consulting including with McKinsey & Company’s Hong Kong office from 2000 to 2003.

CEO Compensation

Joey's compensation has increased by more than 20% in the past year.

Joey's remuneration is about average for companies of similar size in United States of America.

Management Team Tenure

Average tenure and age of the
Yum China Holdings
management team in years:

1.9

Average Tenure

48

Average Age

The average tenure for the Yum China Holdings management team is less than 2 years, this suggests a new team.

Management Team

Joey Wat

TITLE

CEO & Director

COMPENSATION

$8M

AGE

47

TENURE

1 yrs

Micky Pant

TITLE

Vice Chairman & Senior Advisor

COMPENSATION

$10M

AGE

63

Jacky Lo

TITLE

CFO & Treasurer

COMPENSATION

$2M

AGE

41

TENURE

1.8 yrs

Shella Ng

TITLE

Chief Legal Officer & Corporate Secretary

COMPENSATION

$4M

AGE

53

TENURE

2.4 yrs

Johnson Huang

TITLE

General Manager of KFC

COMPENSATION

$3M

AGE

56

TENURE

2.1 yrs

Xueling Lu

TITLE

Controller & Principal Accounting Officer

AGE

44

TENURE

1.2 yrs

Leila Zhang

TITLE

Chief Technology Officer

Christie Ju

TITLE

Vice President of Finance & Investor Relations

Alice Wang

TITLE

Chief Public Affairs Officer

AGE

48

TENURE

2 yrs

Steven Li

TITLE

Chief Marketing Officer

Board of Directors Tenure

Average tenure and age of the
Yum China Holdings
board of directors in years:

2.4

Average Tenure

61

Average Age

The average tenure for the Yum China Holdings board of directors is less than 3 years, this suggests a new board.

Board of Directors

Fred Hu

TITLE

Non-Executive Chairman

COMPENSATION

$460K

AGE

55

TENURE

2.3 yrs

Joey Wat

TITLE

CEO & Director

COMPENSATION

$8M

AGE

47

TENURE

1.7 yrs

Micky Pant

TITLE

Vice Chairman & Senior Advisor

COMPENSATION

$10M

AGE

63

TENURE

1 yrs

Elias Ettedgui

TITLE

Independent Director

COMPENSATION

$240K

AGE

64

TENURE

2.4 yrs

Louis Hsieh

TITLE

Independent Director

COMPENSATION

$245K

AGE

54

TENURE

2.4 yrs

Pete Bassi

TITLE

Independent Director

COMPENSATION

$225K

AGE

69

TENURE

2.4 yrs

Christian Campbell

TITLE

Director

COMPENSATION

$225K

AGE

67

TENURE

2.4 yrs

Ed Chan

TITLE

Independent Director

COMPENSATION

$225K

AGE

55

TENURE

2.4 yrs

Jon Linen

TITLE

Independent Director

COMPENSATION

$225K

AGE

74

TENURE

2.4 yrs

Zili Shao

TITLE

Independent Director

COMPENSATION

$225K

AGE

59

TENURE

2.4 yrs

Who owns this company?

Recent Insider Trading

Yum China Holdings insiders have only sold shares in the past 3 months.

News

Simply Wall St News

A Note On Yum China Holdings, Inc.'s (NYSE:YUMC) ROE and Debt To Equity

With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. … Our data shows Yum China Holdings has a return on equity of 18% for the last year. … Return on Equity = Net Profit ÷ Shareholders' Equity

Yum China Holdings Inc (NYSE:YUMC)'s Return on Capital

and want to better understand how you can grow your money by investing in Yum China Holdings Inc (NYSE:YUMC). … As a result, your investment is being put to work to fund operations and if you want to earn an attractive return on your investment, the business needs to be making an adequate amount of money from the funds you provide. … Thus, to understand how your money can grow by investing in Yum China Holdings, you need to look at what the company returns to owners for the use of their capital, which can be done in many ways but today we will use return on capital employed (ROCE)

Is Yum China Holdings Inc (NYSE:YUMC) An Attractive Dividend Stock?

A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. … Does Yum China Holdings tick all the boxes of a great dividend stock? … When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

Should You Be Tempted To Sell Yum China Holdings Inc (NYSE:YUMC) At Its Current PE Ratio?

Yum China Holdings Inc (NYSE:YUMC) is currently trading at a trailing P/E of 26.3x, which is higher than the industry average of 21.7x. … Although some investors may jump to the conclusion that you should avoid the stock or sell if you own it, understanding the assumptions behind the P/E ratio might change your mind. … View our latest analysis for Yum China Holdings

How Yum China Holdings Inc (NYSE:YUMC) Delivered A Better ROE Than Its Industry

and want to start learning about core concepts of fundamental analysis on practical examples from today's market. … But ROE does not capture any debt, so we only see high profits and low equity, which is great on the surface. … See our latest analysis for Yum China Holdings

April Growth Opportunities – Yum China Holdings And More

Profit growth, coupled with top-line expansion, is a positive indication. … Moreover, the 11.90% growth in operating cash flows shows that a decent part of earnings is driven by robust cash generation from operational activities, not one-off or non-core activities. … Moreover, the substantial growth of over 100% in operating cash flows shows that a decent part of earnings is driven by robust cash generation from operational activities, not one-off or non-core activities.

Yum China Holdings Inc (NYSE:YUMC): What Are The Future Prospects?

The most recent earnings update Yum China Holdings Inc's (NYSE:YUMC) released in December 2017 indicated that the business endured a immense headwind with earnings declining by -19.72%. … Today I want to provide a brief commentary on how market analysts view Yum China Holdings's earnings growth outlook over the next few years and whether the future looks brighter. … See our latest analysis for Yum China Holdings Analysts' outlook for the coming year seems positive, with earnings growing by a significant 60.03%.

It compares a stock’s price per share to the stock’s earnings per share. … Formula Price-Earnings Ratio = Price per share ÷ Earnings per share P/E Calculation for YUMC Price per share = $45.55 Earnings per share = $1.365 ∴ Price-Earnings Ratio = $45.55 ÷ $1.365 = 33.4x The P/E ratio isn’t a metric you view in isolation and only becomes useful when you compare it against other similar companies. … YUMC’s P/E of 33.4x is higher than its industry peers (24.2x), which implies that each dollar of YUMC’s earnings is being overvalued by investors.

NYSE:YUMC Historical Debt Dec 5th 17 A basic way to evaluate YUMC's debt management is to see whether the cash flow generated from the business is at a relatively high level compared to the debt capital invested. … In the case of YUMC, operating cash flow over the past twelve months do cover its current debt,which indicates extremely low risk of YUMC not being able to meet its debt near-team, given that it generates enough cash in a year to pay off its current debt.This is great news for both debtholders and shareholders, as the company exhibits cautious cash and debt management. … YUMC’s relatively safe debt levels is even more impressive due to its ability to generate high cash flow, which illustrates operating efficiency.

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